The recent cryptocurrency development had put a serious dent in the crypto space. The bubble is clearly burst — very clearly. Speculative investors took quite a hit and the money flow from unknown and possibly dubious sources is drying out. What looks like a disaster to some is a very welcome clearance to others.
I’m a Crypto Valley Association Member and an investor and board member in Blockchain Valley Ventures, sitting right in the heart of Crypto Valley. Most recently I received tons of questions — “Where is it going?” “Is blockchain dead” “Is Bitcoin at its end” “Shall we sell?” “Is now a good time to buy?” So let me share my thinking and why I see a more positive future now than a year ago — when everything was just too glossy.
What the caterpillar calls the end of the world, the master calls a butterfly
Yes — some lost millions of Dollars
Remember what happened when the Internet Bubble burst? It wasn’t the Internet that bust but the greed of many investors who just hoped that the craziness would never end. But the Internet itself was never hurt. Today we have not millions but billions of Internet users. Because the Internet makes total sense.
Fast forward, 18 years later, the crypto bubble burst. It’s not the Blockchain that burst, but the investor craziness in a currency that has never shown any value in itself. In the future we will have millions of Blockchain users, using public and private blockchains. Because the blockchain itself makes total sense.
The Future of Blockchain & Crypto
The Crypto Valley Community is working feverishly on the next big steps, the evolution in blockchain technology and crypto currency. Like the software people in Silicon Valley, the blockchain people in crypto valley have a very clear understanding where things will go — because we are creating that future.
Demystifying Blockchain Technology
I feel it’s about time to demystify the blockchain technology. Unlike many people postulate it is NOT this magical architecture running on hundreds of thousands of servers simultaneously and consuming gigawatts of energy just to hide some data in an insanely complex security algorithm. Well you can use it that way — but I actually care less.
Innovative and disruptive smart contracts
The true innovation and in particular disruption to both the software world as we know it and the business process world as we have it, are so called “Smart Contracts”. And this is also why Crypto Valley is so much ahead of the rest of the world. There is a reason why nearly half of the world’s ICOs happened here.
Smart contracts is the actual ‘brain’ of the Blockchain. A Smart Contract does what general software never did: It executes a process autonomously. Very similar to Artificial Intelligence, it is an autonomous vehicle running through the net. And that creates the ultimate power of the blockchain. If an order is entered into a classic ERP system, it requires human action in every single step of the process. Entering the order, processing the order, confirming the delivery, reviewing the payment, observing the shipment and so forth. It makes it extremely slow, error-prone, and costly. The magic of the smart contract that it processes an order completely autonomous based on defined triggers, times, sensors, inputs and no human can intervene or manipulate that process. There is a good reason why IBM, SAP and other big player invested enormously and early on in the blockchain technology. They obviously understood the power of the smart contract technology — which in return requires a blockchain architecture to work in a trusted manner.
The dent in the wallet of a speculating investor will have no effect on the future of the blockchain. And all the current projects here in Crypto Valley show where this technology is already going. We also see why Etherium had such a peak in the meantime: It’s development tools, libraries and APIs had proven to be the most attractive to developers. Also, this will not change.
Shift To New Disruptive Blockchain Applications
As an Investor we obviously are the first to see new companies, new business ideas and possibly new technology shifts. But what we are also seeing right now, is a serious shift in startup quality. A year ago, we have been flooded with whitepapers, which all too often have been a copy of a copy and just yet another crypto currency. That has changed. Today we are very fortunately back to normal. The flood turned into a healthy stream of well thought out and disruptive business ideas. We no longer see the applications that allow a global government be run off of a blockchain but interesting applications in sectors like, supply chain, medical records, pharmaceutical logistics, gamification, business process optimization, IT security, trading, sales and marketing applications and many others where the autonomous processing of smart contracts play a key role for a serious new way of doing business.
Mega shifts on the Crypto side
The clearing air over the cryptocurrency side shows a very interesting development. We will have in the end two types: Security Token and Utility Token. For those not so familiar with the — so far very confusing — crypto side of this world a few words: Cryptocurrency was the “funny money” that transported rewards with the smart contract. If some contractual actions have been completed and confirmed “rewards” or crypto money was paid. That crypto money, very much like the points and other rewards in games or miles, have quickly become so valuable that its value started the craziness that we had until very recently.
In the next evolutionary steps, we are already seeing, we have those two, mentioned above, currency types:
Utility Token
These have a reward characteristic like air miles, points you collect when shopping and so forth. At one point there may be an option to trade it into something or allows you to use it for other features like renewing a software, getting a free flight and so forth. The universal character, the way we can possibly use them across platforms or even trade them makes it a much better vehicle that what we have today. Today’s situation is a convoluted mess of rewards, points and benefits that are so terribly different in their handling that it is actually almost cheating on the consumers to even offer those “benefits”.
Security Token
While they handled inside a blockchain very much like any other token, the purpose of a Security Token in the real world are fundamentally different. These are created to actually have a asset or money equivalent characteristic. Startups can offer shares in their company by using security tokens. The big advantage is that a security token can be traded globally at its designated value and a startup does not need to worry about countless currencies. BUT THAT is highly regulated here in Switzerland and very soon in the US and in the next months or years in other countries. The regulations are by order of magnitude as complex as an IPO but strong enough to prevent money from money laundries enter the ecosystem and will bring the sought after seriousness and investor protection into the game. This major milestone may actually have been the biggest reason for people to pull back their “money” from the crypto world of yesterday and cause the burst.
Looking forward to 2019, the birth of the Butterfly.
@AxelS